Working Paper: NBER ID: w13705
Authors: Luis Garicano; Esteban Rossi-Hansberg
Abstract: We study the impact of information and communication technology on growth through its impact on organization and innovation. Agents accumulate knowledge through two activities: innovation (discovering new technologies) and exploitation (learning how to use the current technology). Exploitation requires the development of organizations to coordinate the work of experts, which takes time. The costs and benefits of such organizations depend on the cost of communicating and acquiring information. We find that while advances in information technology that lower information acquisition costs always increase growth, improvements in communication technology may lead to lower growth and even to stagnation, as the payoff to exploiting innovations through organizations increases relative to the payoff of new radical innovations.
Keywords: Information Technology; Communication Technology; Economic Growth; Organization; Innovation
JEL Codes: D23; E32; L23; O31; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Advances in information technology that lower information acquisition costs (D83) | Increased growth (O49) |
| Lower costs facilitate the development of organizations that can coordinate expert knowledge (D23) | Increased growth (O49) |
| Focus shift from innovation to exploitation (O36) | Reduced growth rates (O49) |
| Introduction of radical innovations renders existing organizations obsolete (O35) | Affects dynamics of growth and innovation rates (O49) |
| Timing and magnitude of technological shifts are endogenous to organizational processes (O33) | Growth dynamics influenced by historical accumulation of knowledge and organizational complexity (O49) |
| Improvements in communication technology (L96) | Lower growth (O41) |
| Lower communication costs increase the value of exploiting existing technologies (L96) | Lower growth (O41) |